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Viscount Bridgeman moved Amendment No. 12:

The noble Viscount said: My Lords, we have brought forward a fresh amendment because we believe that the right of access remains a fundamental issue for the Comptroller and Auditor General. That arises because of the major changes which have taken place in the way the Government now operate. The Bill as drafted confines the powers of the C&AG to access within the walls the government departments as if the machinery of government was the same as in 1866 when departments provided most of the services. But nowadays a wide variety of different bodies deliver public services, some of which the C&AG does not audit. Audit arrangements have not kept pace with the changes in the structure of government. As a result, Parliament's ability to scrutinise the use of public funds has been reduced.

The C&AG's independence is diminished by his reliance on negotiating his way into a number of bodies to provide the assurance to which Parliament is entitled. That is costly in time. One might also say that it is not consistent with the standing of the office. The noble Baroness, Lady Sharp of Guildford, cited instances where negotiations with the Housing Corporation and with Camelot dragged on for years. I could add to those similar protracted discussions with the Royal Palaces and with training and enterprise companies. I believe that there could be cases where the institutions concerned refuse to co-operate. In those circumstances, Parliament would be the loser.

By accepting that the C&AG, where he does not have statutory rights, then has to negotiate, the Minister has also accepted that, on occasions, he needs rights of access to private contractors. That has not deterred firms from coming forward to provide services for government or to negotiate PFI deals. However, negotiated rights on an individual basis require time-consuming discussions between the NAO and the relevant departments. As I have already said, they undermine the independence of the C&AG.

In Grand Committee we tabled an amendment which was supported by the Liberal Democrats. It sought to bring up to date the access rights of the C&AG. I hope that the Minister will agree that a fair summary of the Government's objections to the amendment appeared to be that it would significantly increase the access rights of the C&AG, thus allowing him to follow public money wherever it goes and that, as a result, he would duplicate the work of other bodies and would be a burden on private sector firms. The

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Minister went on to say that extended access for the C&AG might deter contractors from competing for PFI work--a point that I have already discounted.

I shall consider those arguments, but I should like, first, to make the point that, in our view, our previous amendment would not have extended the powers of the C&AG as much as the Minister said. He stated that the original amendment would have had the effect of giving the C&AG access to the books and records of private sector firms on the same basis as that of the Inland Revenue. However, the C&AG already has access to the records collected by the Inland Revenue because he is the auditor for the Revenue. His staff already see individual records on a confidential basis. Although those powers are rarely used--something in the order of half of 1 per cent of visits undertaken by the Inland Revenue are accompanied by the C&AG--they are available to him.

The Government have also said that giving the C&AG wider statutory powers would allow him to follow public money wherever it went. Even our original amendment would not have conferred the same powers in the United Kingdom as those possessed by the staff of the Luxembourg-based Court of Auditors or as the Audit Commission and Accounts Commission in Scotland enjoy when auditing local government accounts. Such rights of access have not brought local government to a standstill or impeded imaginative partnerships within the private sector. The Government appear to accept that the Audit Commission and the European Court of Auditors require strong statutory powers, but apparently are not happy for those powers to be matched by Parliament's own auditor.

Perhaps I may explain what the new Amendment No. 13 seeks to achieve. In so doing, perhaps I may also take account of the Minister's concerns. The amendment as tabled would confine the C&AG to statutory access to documents held or controlled by government bodies as well as documents to which those bodies have or can obtain access. It would thus give access to the same documents and information as central government bodies secure for themselves--and no more. That would enable the C&AG to undertake an independent check that government bodies are fulfilling their responsibilities to account for the proper use of taxpayers' funds entrusted to them. It gives statutory access where, in many cases, negotiated access already exists. This will help to cut back on the need for time-consuming negotiations.

It also gives statutory form to guidance already issued by the Treasury which states that the C&AG must have access to the records of PFI contractors. Placing it on the statute will ensure that clauses are not missed out of contracts by accident.

Perhaps I may briefly summarise what the amendment will not do. It will not give greater access to information and documents than accounting officers have in accounting to Parliament for the use they have made of public money. It will not allow the C&AG or his staff to go on fishing trips. The statutory right will cover only the examination of the

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department's accounts and will cover only documents relevant to this examination. I refer to the word "relevant" in Amendment No. 12.

The amendment will ensure that the C&AG is not provided with statutory access to the records of local government. It will not provide access to sub-contractors or other bodies at a distance from local government. This addresses the Minister's comment concerning the additional burden on small businesses. Lastly, it will not allow the C&AG to follow public money wherever it goes, however desirable noble Lords and Members of another place think that power would be.

In short, powers of access will not be increased; they are simply placed on a firmer footing. Public money is not followed to small employers unless they contract with government bodies. It will not impose a regulatory burden. The C&AG will draw on the work of other bodies wherever needed, as he does already.

I should like to make one further important point. In its ninth report, the Public Accounts Committee expressed concern that it is unsatisfactory that departments regularly secure greater powers of access to service deliverers than are secured for Parliament's watchdog, the C&AG. I suggest that this amendment will address that concern.

It has been suggested that it is not appropriate for the C&AG to have the same right of access as departments because the Government have a larger range of responsibilities than has the C&AG. We believe that that argument is difficult to sustain. In some quarters it could be held strongly that the C&AG's responsibility to Parliament in itself demands all the rights of access it needs to perform its work effectively. This proposition suggests a kind of pecking order for degrees of rights of access.

If concern is felt at the additional cost to public funds of granting the C&AG these limited wider powers, I am sure that he, like everyone else, is constrained by his resources, for which he is held accountable to a parliamentary commission. It is not in the C&AG's interest to do unnecessary work, but he must have the powers necessary to carry out his work professionally and in the modern context of government. I beg to move.

5.45 p.m.

Baroness Sharp of Guildford: My Lords, as the noble Viscount, Lord Bridgeman, has already said, in Grand Committee we on these Benches supported similar amendments tabled by the official Opposition. We continue to support them. We feel that an issue of principle is at stake here. The Comptroller and Auditor General has audit responsibility, but at present he does not have all the powers necessary to fulfil that responsibility. We think that it is important that he should be given those powers.

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Furthermore, we think that the Opposition has made a considerable attempt to redraft the earlier amendment so as to take account of the objections raised by the Government on this issue. For that reason, we are inclined to offer our support.

Lord McIntosh of Haringey: My Lords, I hope that I shall be able to remove the noble Baroness's inclination, because the amendments before the House do not achieve what the noble Viscount, Lord Bridgeman, seems to think that they will achieve. He believes that they will address the concerns we expressed on the previous proposed new clause, but I have to say that they do no such thing. The amendments will still increase the statutory rights of access of the Comptroller and Auditor General far beyond what is reasonable.

Perhaps I may deal principally with Amendment No. 13, which is the most substantive in this group of amendments. The amendment would give the C&AG rights of access to documents,

    "which are held or controlled by a government department".

That is perfectly reasonable. The Bill already contains those words in Clause 8(2)(a). However, the amendment goes on to say that it would give the C&AG rights of access to documents,

    "which are held or controlled by a non-departmental body".

That is where we start to have problems, because the provision again raises the problems which flow from trying to define non-departmental public bodies (NDPBs) on the face of the Bill, and to which I have already referred in connection with the amendment on the audit of NDPBs. Perhaps I may emphasis that NDPBs are an enormously varied group of bodies. There are too many potential variations of NDPBs to capture within a single legally sound definition. For that reason, they have never been defined in statute.

Of most concern, however, is the final part of the amendment. It would give the C&AG a right of access to documents,

    "to which a government department or a relevant non-departmental public body has, or can obtain, access".

This provision would allow the C&AG a much greater degree of access than at present, and far more than is necessary. First, he would have unrestricted access to all bodies, public or private, which are funded by, or are contractors to, departments and NDPBs. The amendment would give him access to bodies such as housing associations, which are private sector bodies supervised and part funded by the Housing Corporation, or to train operating companies, which are private sector companies supervised and part funded by the rail regulators, which are government departments, leading to a burdensome overlap of scrutiny and duplication of regulatory functions. Audit and regulation must be kept separate.

To the extent that a department itself has or can obtain access to its suppliers' documents, the amendment would provide access to every such supplier even if they only provided paper clips or cleaned the windows.

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The amendment would also give the C&AG access to virtually every body receiving public money--including in theory those many individuals in receipt of social payments to the extent that the funding department has access.

Most alarmingly, the amendment would allow the C&AG access to the books and records of private sector firms on the same basis as the Inland Revenue in examining whether tax credits have been properly calculated or as Customs and Excise in relation to VAT. Such access would be both a duplication of oversight and unnecessarily intrusive.

The noble Viscount, Lord Bridgeman, thought that an argument in favour of the amendment was that the C&AG has access under certain circumstances, rarely used, to Inland Revenue records. Indeed, that is the case. But the amendment provides for him to have separate access to all those people who are at present vulnerable to access by the Inland Revenue and Customs and Excise.

I remind the House that at the beginning of this year, when these concerns were first raised, Accountancy Age published an article on 27th January recording the deep reservation on the part of business as regards allowing the National Audit Office to audit firms and companies handling the working families' tax credit. The British Chambers of Commerce and the Federation of Small Businesses have said that the measure would only increase the burden of red tape on small and medium-sized firms. These amendments still do that. I shudder to think what my noble friend Lord Haskins and the Better Regulation Task Force would think about the amendment if it were put forward by the Government, let alone, most extraordinarily, by the Conservative Opposition.

Moreover, there is no evidence that the C&AG needs these powers. Let us consider the facts. The C&AG has now audited the first set of "dry run" resource accounts and, although he qualified a number of accounts, he did not qualify one on the grounds of insufficient access. He has also recommended to the PAC that the move to resource accounts and budgeting should go ahead. Would he have done so if he had had serious doubts about his ability under present powers to carry out the audit?

During the PAC's hearing on 7th June on the introduction of resource accounting and budgeting, the Comptroller and Auditor General, Sir John Bourn, said in response to Question 47, that,

    "the operation of the new system does not depend on the extension of the Comptroller and Auditor General's powers".

Those words indicate that a significant extension of the Comptroller and Auditor General's access (which I assume is what the amendment means) is not actually needed for the practical purpose of auditing department accounts, which is what Clause 8 of the Bill is concerned with.

I have technical criticisms of the amendments with which I shall not weary the House. The amendments are defective. The wording in the Bill that would be changed by the amendments has been in legislation since 1866, and it seems rather strange to change it

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now, nearly a century and a half later. But the fundamental point is that the Bill as it stands allows the C&AG to continue to deliver his very high standard of audit. He does not need these sweeping and intrusive new powers of access in order to audit department accounts. I cannot accept the amendments, and I cannot believe that the Conservative Party, above all, will wish to press them.

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